ARPU (Average Revenue Per User)

ARPU (Average Revenue Per User) is the average recurring revenue your business earns from a single active user over a period, usually a month. It answers a simple question: on average, how much is each person paying you? Rising ARPU means you're monetizing users better; falling ARPU can signal discounting, downgrades, or a shift toward cheaper plans.

How to calculate ARPU

Divide total recurring revenue for the period by the number of active users in that period.

For a monthly figure, use MRR as the numerator. If you have $28,000 in MRR spread across 2,000 active users, ARPU is $14/month. For an annual view, multiply the monthly figure by 12 or divide annual revenue by users.

The one rule that matters: keep the numerator and denominator on the same basis. Monthly revenue with a monthly user count, annual with annual. Mixing them produces a number that means nothing.

Why ARPU matters

• Pricing signal — a stagnant ARPU while you add features suggests you're leaving money on the table, or that new users are clustering on your cheapest tier.
• Segmentation — comparing ARPU across plans, regions, or acquisition channels shows where your most valuable users come from.
• Modeling — ARPU multiplied by expected customer lifespan is a fast estimate of LTV.

ARPU vs ARPA

ARPU counts individual users, while ARPA counts paying accounts or organizations. In a self-serve product where one person equals one account, the two are nearly identical. In a B2B product where a single account has many seats, ARPA is much higher than ARPU, and both are worth tracking. Growing ARPU often comes from expansion revenue as existing users upgrade or add usage.